One of the fastest growing cybercrimes in the U.S. is real estate wire fraud. According to FBI data, approximately 11,300 people were victims of wire fraud in the real estate and rental sector in 2018 (a 17 percent increase over 2017), with losses of more than $150 million.
Wire fraud has been increasing steadily over the years, and in the current environment — with many closings being handled online — the risk is higher than ever. If you’re in the middle of a real estate transaction, it’s important to know how wire fraud happens and how you can protect yourself.
What is wire fraud?
When buying a home, you’ll typically need to pay some closing costs or fees as part of the purchase. Real estate wire fraud occurs when a thief or hacker somehow convinces you, the buyer, to send your closing costs their way. For victims of wire fraud, it’s often difficult, if not impossible, to get their money back.
Lisa Haun, account executive and shareholder of Transnation Title Agency, says today’s criminals are particularly sophisticated, hacking into professionals’ email accounts in order to study their marks closely.
“The fraudster watches for communications related to upcoming transactions, and when they find someone about to close on a home, they send a fake email that appears to be from the buyer’s REALTOR®, lender, or title representative,” she said. “They adopt signature blocks and use similar email addresses to make it appear legit, and they tell the buyer there are ‘new’ wiring instructions. Those instructions direct the money to a fraudulent account.”
This type of wire fraud is called Business Email Compromise/Email Account Compromise (BEC/EAC). According to the National Association of REALTORS®, from calendar year 2015 to 2017, there was over an 1100 percent rise in the number of BEC/EAC victims.
“Although the FBI and local police agencies are working diligently to catch these criminals, millions of dollars have been unrecovered,” said Haun.
What are the warning signs?
Fortunately, wire fraud is pretty easy to spot if you know what to look for. It’s important to always be alert and to double check everything so you don’t become a victim. Remember, when it comes to an investment this important, you can never be too careful.
Haun says buyers should be on the lookout for the following red flags:
- A change to wiring instructions (language, timing, amounts, etc.).
- A wire account payee name that differs from the principals on the transaction.
- A request to wire funds to a foreign or unknown bank.
- Any instructions sent by email, especially when sent late in the transaction process when verification is more difficult, or at the end of the month when closings are more frequent.
- Any instructions marked as rush, urgent, or secret.
- Misspellings or improper grammar in the body of the email (although fraudsters are getting better at this).
How do I protect myself?
In today’s climate, email is essential. And there’s nothing wrong with using this important tool, if you are smart about the information you’re sending. Never send confidential, personal, or financial information via email, and always be cautious about opening attachments and downloading files, regardless of who sent them.
“It’s best to discuss wiring instructions in person, if possible,” said Haun. “If you aren’t able to do that, make sure to speak with a trusted contact over the phone using a known number — one you received early in the transaction, not one that was sent in a suspicious or last-minute email.”
You can also help lower your risk of fraud by working with reputable, local professionals who are looking out for your best interests.
“Communicate regularly with your agent, lender, and title representative, and discuss the money wiring process early on in the transaction so you know what to expect and understand your options,” said Haun.
Also, ask your REALTOR®, lender, and title company about their fraud prevention practices and safeguards.
What if I suspect fraud?
The sooner you take action, the better your chance of recovering your money. If you suspect you are the victim of fraud, contact your bank right away and request that they recall your wire funds.
Whether you’re able to get your money back or not, you should report the incident to the proper authorities, including your local police department, your regional FBI office, the FBI’s Internet Crime Complaint Center, and the Federal Trade Commission (FTC). This is an important step because it helps these agencies better understand the patterns and methods used in wire fraud activity, and it helps prevent it from happening to other homebuyers.
To stay up-to-date on issues like this affecting the real estate industry, follow the Greater Lansing Association of REALTORS® on Facebook, and visit the website at www.lansing-realestate.com.